Dongsung Automotive (P.) Ltd. Vs Superintendent of Central Taxes

Mr. Muthuvenkataraman, the learned counsel representing the writ petitioner, and Mr. V. Sundareswaran, the learned senior panel counsel (GST), who accepted notice on behalf of respondents 1 and 2, are present before the Court. It’s important to note that the third respondent is the Indian Overseas Bank, but its role in this matter is merely as a Garnishee, meaning it’s involved in a formal capacity rather than as an adversary in the case. Therefore, any order passed by the Court will be communicated to the third respondent by the Registry. With the consent of both counsels, the Court proceeds to hear and dispose of the main writ petition.

Mr. Muthuvenkataraman, representing the petitioner in a writ petition, and Mr. V. Sundareswaran, representing respondents 1 and 2, are present before the court. The third respondent, Indian Overseas Bank, is only involved as a garnishee and is not an adversary in the case. The court notes that the order will be communicated to the third respondent by the Registry. With the consent of both counsels, the court proceeds to hear and dispose of the main writ petition.

The petition pertains to the Goods and Services Tax (GST) regime, with the petitioner being a registered entity involved in manufacturing automotive parts. The Central Goods and Services Act, 2017 (CGST), forms the legal basis of the petition. The petitioner claims Input Tax Credit (ITC) based on invoices and other legal documents, and regularly files tax returns. The petitioner contends that it is entitled to utilize the ITC towards its tax liability.

Mr. Muthuvenkataraman, the counsel for the petitioner in a writ petition, and Mr. V. Sundareswaran, representing the respondents, appeared before the court. The third respondent, Indian Overseas Bank, is involved in the case merely as a formal party. The court decided that it would suffice to communicate the court’s order to the third respondent via the Registry, as they are not directly involved in the dispute.

With the agreement of both counsels, the court proceeded to hear and dispose of the main writ petition. The petition concerns the Goods and Services Tax (GST) under the Central Goods and Services Act, 2017 (CGST). The petitioner, engaged in manufacturing automotive parts, claims entitlement to Input Tax Credit (ITC) and regularly files returns.

The petitioner asserts its eligibility to utilize the ITC towards its tax liabilities and admits its obligation to pay output taxes. However, due to the inability to pay taxes in cash on time, the petitioner accrued interest liabilities.

The dispute centers on a communication dated 14.03.2019 from the first respondent, referring to Section 50 of the CGST Act, which directed the petitioner to pay interest at 18% per annum on delayed tax payments from July 2017 to November 2018. The petitioner responded on 29.03.2019, explaining that delayed payments were due to a customer’s consistent delay in payment and highlighting the substantial utilization of ITC credits.

The court considered these arguments along with submissions from both sides. The petitioner’s contention regarding the utilization of ITC credits and the reasons for delayed payments were examined. After thorough consideration, the court proceeded to pass its order.

The proceedings before the court involve Mr. Muthuvenkataraman, the counsel representing the petitioner in a writ petition, and Mr. V. Sundareswaran, the senior panel counsel for GST, representing the respondents. The third respondent, the Indian Overseas Bank, is essentially a formal party in the case, acting as a garnishee, and thus, any order issued by the court will be communicated to them by the registry, as they are not directly involved in the dispute.

With the consent of both counsels, the court proceeds to hear and dispose of the main writ petition. The petition concerns the petitioner, engaged in manufacturing automotive parts, and their interactions with the Central Goods and Services Act, 2017 (CGST). The petitioner regularly claims Input Tax Credit (ITC) based on invoices and other legal documents and files monthly returns.

The petitioner argues their entitlement to utilize the ITC towards tax payments but acknowledges their liability to pay output tax. However, due to cash flow issues, they couldn’t pay the entire taxes in cash on time, incurring interest liabilities. The petitioner received a communication from the first respondent on March 14, 2019, directing them to pay 18% per annum interest on delayed tax payments from July 2017 to November 2018.

In response, the petitioner explained their inability to pay the cash component on time, attributing it to delays in receiving payments from a customer. They claimed to have adjusted nearly 73% of ITC against the total GST payable and calculated interest on the remaining cash component. They provided a computation sheet along with their response.

The key question arises: is the petitioner liable to pay interest on the ITC as well?

Following the petitioner’s response, the Office of the Superintendent of Central Tax issued a communication demanding payment. Subsequently, on May 23, 2019, the second respondent directed the third respondent bank (the petitioner’s banker) to make the payment as per the demand, under Section 79 of the CGST Act.

The court now considers these facts and arguments to reach a decision on the matter.

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